Saturday, May 23, 2015

Those of you who have read my blogs will know that I
spare no niceties when it comes to describing and defining the global banking
industry.

For those of you who are new to my observations, I
reiterate my firmly-held belief that by far the majority of those who work in
the major global banks have become corrupted by their remuneration, and their immunity
from accountability, and have become little more than unrepentant organised
financial criminals.

I am on record in many places saying that I do not
believe that these institutions could return the level of revenues and achieve
the targets they are set, without committing wholesale criminal offences, of
theft, fraud, false accounting, forgery, insider dealing and wholesale market
manipulation.

I have been roundly condemned by the institutions
themselves who dislike the fact that a former Fraud Squad detective like myself
will so openly denounce them for being the criminal mafias that they are.

I do so because these institutions appear to make no
effort to put their houses in order, despite repeated fines for criminal
misbehaviour. The latest fines imposed on the industry just join a long queue
of other fines imposed for previous criminality. Despite all the evidence, as
yet, no-one has been sent to prison for any of these criminal forays, and
despite the fact that the institutions rarely put up any meaningful contest
when charged with these scandalous affairs.

It is almost as if the entire regulatory and political
galere has simply come to accept as a matter of course, that the financial
services industry is staffed by a bunch of morally dysfunctional criminals who
appear to think nothing of flouting the criminal law on a wholesale basis.

But what can it possibly take for these Mafiosi to be
brought to heel, when the regulatory agencies, the SFO and the Police
Intelligence Agency do absolutely nothing to confront them?

Only this week, yet another major scandal has broken
involving the usual list of criminal suspects.

Barclays Bank has been fined £1.5 billion by UK and US regulators over
foreign exchange (forex) failings.

The £1.5 billion fine includes a £284 million fine by the Financial Conduct
Authority (FCA), which is the largest financial penalty ever imposed by the
FCA, or its predecessor the Financial Services Authority (FSA).

US regulator the Commodities Futures Trading Commission has fined Barclays
$400 million (£257 million), the New York State Department of Financial
Services $485 million (£311 million) and the U.S. Department of Justice (DOJ)
$710 million (£456 million).

Barclays is one of five institutions including Royal Bank of Scotland,
JPMorgan Chase , UBS and Citigroup that have been fined a total of almost
£4 billion over the manipulation of foreign exchange rates.

The FCA said that Barclays’ failure to adequately to control its
forex business was particularly serious in light of its potential impact
on the systemically important spot forex market.

Georgina Philippou, FCA acting director of enforcement and market oversight,
said: 'This is another example of a firm allowing unacceptable practices to
flourish on the trading floor. Instead of addressing the obvious risks
associated with its business Barclays allowed a culture to develop which put
the firm’s interests ahead of those of its clients and which undermined the
reputation and integrity of the UK financial system.'

If Ms Philippou is not careful when it comes to describing the wholesale
horror stories perpetrated by the banks, she will attract the same reputation
for blurbspeak, as that which defined her predecessor in title, Tracy
McDermott.

The FCA found that between 1 January 2008 and 15 October 2013, Barclays’
systems and controls over its forex business were inadequate.

It said these failings gave traders the opportunity to engage in behaviours
that put Barclays’ interests ahead of those of its clients, other market
participants and the wider UK financial system.

These behaviours included inappropriately sharing information about clients’
activities and attempting to manipulate spot forex currency rates, said
the FCA.

So, possessing this damning knowledge, why has the FCA reverted to its
traditional discredited methods of issuing fines. It doesn’t matter how much
you fine these institutions, because it doesn’t come out of the pockets of the
directors or responsible people. It is paid for by Shareholders yet again,
while the directors and the board continue to pick up their bonuses and salary
packages.

The FCA said that Barclays was among other banks already
participating in an industry-wide remediation programme, which included senior
management at Barclays taking responsibility for delivering the necessary
changes.

Barclays chief executive Antony Jenkins said the misconduct at the core of
the failings is ‘wholly incompatible with Barclays' purpose and values and we
deeply regret that it occurred. ‘

He added that dealing with these issues and appropriate disciplinary
action was a ‘key priority’ in its plan to transform Barclays.

Jenkins said: ‘This demonstrates again the importance of our continuing work
to build a values-based culture and strengthen our control environment. We
remain completely committed to that effort. I share the frustration of shareholders
and colleagues that some individuals have once more brought our company and
industry into disrepute.’

In November 2014 the FCA, alongside US and Swiss regulators, fined five
banks – Citibank, HSBC, JP Morgan Chase and UBS – a combined £2.1 billion over
forex failings.

The fines related to the five banks' G10 currencies spot forex trading
operations.

In April, Barclays set aside an additional £800 million for provisions for
its involvement in the forex scandal, bringing its total provisions over the rate-rigging
probe to £2 billion.

These are facts and they arise out of pleas of gulty to the commission of
criminal offences, so why are none of these guilty men facing lengthy gaol
sentences?

Well, now we may have the evidence we have long needed to demonstrate the true
level of criminal corruption which has gripped the financial industry. This
proves, once and for all, that these egregious crimes are not simply committed
by a few rogue traders, which is, of course, what the directors would have us
believe, but proves that wrongdoing and criminality is inherent throughout the
entire business model.

Quoting
from a damning report by a US law firm Labaton Sucharow LLP on the findings of
a survey of financial services professionals, reveals widespread disregard for ethics,
and an alarming use of secrecy policies to silence employees

So whatever the
bank CEOs may want to tell us about ‘...building a values-based
culture and strengthening our control environment...’ any efforts to reform
Wall Street and The City of London may be faltering dangerously.

The
survey, the most expansive of its kind, polled more than 1,200 U.S. and
UK-based financial services professionals to examine views on workplace ethics,
the nexus between principles and profits, the state of industry leadership and
confidence in financial regulators. With findings pointing to a continued
disregard for ethical engagement and alarming new tactics to silence potential
whistleblowers, the industry appears to be faltering in its reform efforts.

In one of
the most concerning findings, 47 percent of total respondents feel it is likely
that their competitors have engaged in illegal or unethical behaviour to gain
an edge. While nearly one in five professionals feels it is at least sometimes
necessary for financial services professionals to engage in illegal or
unethical activity in order to succeed, a full 32 percent feel compensation
structures or bonus plans pressure employees to compromise ethical standards or
violate the law. Of those surveyed, 27 percent don't agree that the industry
puts the interests of clients first.

How severe is the ethical breakdown? An astonishing 22 percent of respondents
say they have observed or have first-hand knowledge of actual wrongdoing in the
workplace. On an individual level, a quarter of those surveyed say they would
likely engage in insider trading to make $10 million if there was no chance of
being arrested. Employees with less than 10 years of experience are more than
two times as likely to use non public information than those with over 20 years
of experience, reporting 32 percent and 14 percent respectively.

"Most disappointing is the lack of change in many of the results when
compared to surveys from previous years. Despite significant energy and
efforts, it appears we need to continue to think about how to improve the
culture of ethics in the financial services industry and most likely, in other
sectors as well," said co-author Ann Tenbrunsel, Ph.D.

Perhaps the most disturbing findings relate to efforts to stifle reports of
misconduct. Despite the unwaivable right and indeed, legal duty to report
potential wrongdoing to law enforcement, and the federal government's public
effort to identify and punish organizations that illegally attempt to silence
employees, a shocking 16 percent of those polled say their company's
confidentiality policies and procedures prohibit reporting potential illegal or
unethical activities directly to law enforcement.

One out of every 10 respondents report they have signed or have been asked to
sign a confidentiality agreement that specifically prohibits reporting
potential illegal or unethical activities directly to law enforcement. For
those who make over $500,000 annually, that number rises to 25 percent. Of the
total sample, 19 percent feel it is likely that their employer would retaliate
against them for reporting wrongdoing.

"When corporate whistleblowers are prohibited, discouraged or retaliated
against for reporting crime to cops, we should all be scared—very scared,"
said Jordan A. Thomas, Chair of the Whistleblower Representation Practice at
Labaton Sucharow and co-author of the report. "The widespread, systematic
and previously unknown scope of gag orders in Corporate America is a wake-up
call for the SEC and other law enforcement authorities. These tactics are
particularly insidious because they keep local, state and federal law
enforcement organizations in the dark about all types of wrongdoing—everything
from large-scale corporate frauds, environmental accidents and public safety
concerns."

According to both U.S. and UK survey respondents, financial regulators and law
enforcement authorities play a critical role in detecting and deterring
corruption.

These
are highly disturbing statistics and clearly demonstrate that the financial
industry is riddled with criminal behaviour, behaviour which is recognised by
management and not only tacitly condoned, but positively approved of by the use
of gagging clauses, effectively preventing employees from speaking out.

This
report must now be read by the entire Investigations Division of the FCA and
its contents discussed and its findings analysed. These figures are reflective
of the UK banking industry as well and demonstrate a very high level of
criminal misconduct. This information must be assimilated into professional knowledge
by the FCA and its enforcement staff and used to define and drive its
investigative decisions.

There
is no longer any room for complacency on the part of the FCA and those persons
wh have played such a leading part in facilitating the criminal wrong-doing
which has resulted in such huge fines, must be identified and prosecuted.

The
Barclays CEO has made great play of the bank’s new ethical policies and its
programmes to teach ethics and business transparency. In the light of findings
such as these it is highly unlikely they will be successful.

When
I tried to bring the evidence of Organised Criminality in banking to the
attention of the Parliamentary Commission on Banking Standards, my evidence was
withheld and suppressed and never published, because it was said ‘the banks
wouldn’t like it’. Now we are in possession of facts such as these, I should be
interested to hear what the Banking Commission has to say about banking
standards today!

Sunday, May 03, 2015

I am
publishing a case-study of the experiences of a lady who has become a regular
correspondent with me. Her story is a scandal, a modern morality tale of our
times. She deserves so much better but she is being let down by every agency
set up to deal with financial misfeasance. It is cases like this that diminish
us, and bring the agencies of control into disrepute. But first, I will let her
recap.....

“...In
March 2006, having discussed our financial circumstances with ****
Financial Management Ltd, my husband was told by their mortgage advisor
****** ****** our monthly outgoings could be dramatically reduced if we agreed
to switch our existing £725,000 mortgage with TMB to an interest only discounted
mortgage with the Bank of Scotland and restructure our short term borrowings.

He
advised us to increase the debt secured against our home by firstly taking a
further £65,000 by way of a Bank of Scotland further advance, secondly by
making use of a £40,000 draw down which, underwritten at outset, would be made
available to us after three months of regular monthly interest payments and
thirdly by taking a three month payment holiday for which we would also be
eligible after making three monthly interest payments.

His
recommendation was to use all the additional funds raised against the remaining
equity in our home to repay credit cards Keen to alleviate his cash flow
problems at a time when the terminal illness of two of his closest relatives
(his mother and brother) was making it impossible to divide his time
effectively between the needs of his family and the demands of his business, my
husband agreed.

After a financial fact
finding telephone conversation with my husband, the mortgage application
(which we never saw) was submitted online by the broker whom we never met
using false information which was tailored to fit the Bank of Scotland’s
underwriting requirements. We did not supply the information the broker
wrote on the application form .There were no acquisition costs to pay,
neither were there solicitors or surveyors to instruct as the cost of the
valuation and the conveyance, along with instructions, were either taken
care of by the lender or added to the advance.

On 30 March 2006, after
being told by the broker verbally (again by telephone) we had received a
mortgage offer for £790,000 from the Bank of Scotland as a result of his
submitting our application on line we were sent, and duly signed, the
declaration page and the direct debit mandate of an otherwise blank
application form. There then followed another declaration sheet, once
again without a completed application form, approximately two weeks
later

As a
result of his efforts, the broker earned almost £4000 and we, unwittingly,
agreed to move from a very tight corner which could have been rectified by the
sale of our house, to an impossible situation amounting to
tens of thousands of pounds in arrears; a £217,000 mortgage shortfall which
occurred from the forced sale of our home in 2009 and six long years of
battling with an unsympathetic bank while trying to establish precisely what
happened to put us in such a position.

Had HBOS
not inadvertently sent me a copy of our original application form (minus the
declaration pages) by way of an explanation to some wildly inaccurate claims
they were making about the original purchase price and original purchase date
of our house in response to my over valuation complaint to them, I might never
have discovered the fraudulent nature of the information the application form
contained.

This
evidence first came to light in January 2013 and, as a result of a complaint I
then made to the Financial Ombudsman Service about overvaluation, irresponsible
lending and the falsified information on our mortgage application, I was told
(in January 2014 after a full FOS investigation had been completed) my case
should have cited the mortgage broker and not HBOS. Needless to say the
FOS were unable to uphold my complaint as it was deemed HBOS were faultless because
they were not the appointed advisors for the mortgage sale.

The
application form which ************ completed states that the mortgage product
applied for was a sale he “advised” as a representative of **** Financial
Management Ltd. It also states our accounts were available and the
mortgage was not self certified. It goes on to claim the following;

************** had face to
face contact with both my husband and I during the application process.
This is completely untrue. We have never, on any occasion, met
************ and all communications between my husband and ************
were via telephone, email, fax or post. I have had no face to face or
telephone contact with ************.

Both ************and ****
Financial Management claim they saw our original passports for money
laundering purposes. This is completely untrue. We were merely asked to
send photocopies of our passports and a council tax bill both of which
have been signed off by **** Financial Management in handwriting which
does not appear to be ************'s.

Our earned income is shown
on the application form as approximately 249k plus 75k with a further 50k
in rental income for the years 2005, 2004 and 2003. Our actual income, as
illustrated by our company accounts and Inland Revenue supplied tax
returns, amounted to little more than 50k per annum in total for the years
stated.

The purchase price and
purchase date of the property is shown as £890,000 in 2004 when in fact it
was purchased in 2000 for £250,000.

The age of the property is
shown as 20 years old when in fact it could be as much as 300 years old or
more and part of the property is thought to have been recorded in the
Doomsday Book.

The application states the
property has five bedrooms and three living rooms when it actually has four
bed rooms and two living rooms

When I
reported the details of this fraud to the Bank of Scotland, I was advised never
to contact them again. Next I reported the matter to the FCA who were insistent
that what had happened appeared to be fraud and therefore beyond the remit of
both themselves and the FOS. The FCA advised me to contact the police. This I
have done and my case details have been logged and given a crime reference
number. The Devon and Cornwall Police advised me to seek legal advice.

Having
initially spoken to the Avon and Somerset Police Serious Fraud Office in August
2014 to inquire as to whom I should report this financial crime, I was told the
Bristol police had uncovered a similar mortgage broker fraud amounting to 11
million pounds. This week Swinton Insurance Brokers directors were fined
£900,000 by the FCA for creating an over incentivised culture which promoted
miss selling and wrongdoing. It is estimated they will be required to pay 11
million pounds in customer compensation.

I strongly
suspect the same unscrupulous methods have been equally lucrative for ****
Financial Management Ltd but to date I have been unable to get to the
bottom of why they were removed from HBOS’ lending panel during my applications
processing. Nor have I been able find out if they have been the subject of
other similar complaints or any formal regulatory disciplinary action. So
far, I have requested this information from HBOS, ****, the FCA and Openwork
broker network support. My requests have either been ignored or denied.

In the
meantime I have, on the instructions of the police, informed the Bank of
Scotland (formerly HBOS) that they have been a victim of fraud and asked them
to file a police report too.

I have
received no letter of acknowledgement or response.

Had
************ of **** Financial Management not falsified our mortgage
application to secure us an unsuitable and unaffordable mortgage against our
home, we would have had no alternative but to sell it for the £925,000 value
the Bank of Scotland surveyor gave it at the time. A valuation which both the
Bank of Scotland and the Financial Ombudsman have both later endorsed as fair
and accurate in my FOS complaint of 2013...”

What is
very clear in this case is that my correspondent has been seriously financially
damaged by the unlawful actions of the financial intermediary.

She has
been placed in an invidious position as the result of a mortgage she never
applied for, and was submitted without her knowledge or approval.

There is
no doubt that the fraudulent application was an example of a criminal offence
under both the Fraud Act and under Section 17 of the Theft Act 1968. In
addition there is evidence of an offence of forgery and of uttering a forged
document, all of which have benefited the intermediary.

She has
sought appropriate help from every agency capable of assisting her and she has
been turned away at every turn. This is happening in a country which is
supposed to be planted wall to wall with laws designed to defeat such
fraudsters, and yet no-one will get off their ‘delicate positions’ to help her.

In
desperation, she asked my advice about applying to the police, and it was I who
referred her to the detectives in her home area of Avon and Somerset. Those
officers gave her positive assistance and confirmed that they were working on a
similar case example. However, for technical reasons, the offence appeared to
have been committed in Devon and Cornwall, and she was referred to the police
there.

Greatly encouraged by the communication from Avon and Somerset, she
contacted another agency, Action Fraud. She says;

“...When
I initially spoke to the Bristol contact you found me (through your
contact on the Economic Crime Team) D. Sgt.***** of the Avon and Somerset
Police, he told me he was investigating a very similar broker fraud in Bristol
amounting to 11 million pounds and counting. He spoke with great of enthusiasm
for the uncovering of this type of crime so I was very much encouraged. As my
case fell out of his jurisdiction (because my mortgage broker
committed the offence in Cornwall) he said I should contact Action Fraud so an
officer from the Devon and Cornwall police could be assigned to my case. Action
Fraud were very careful to record every detail of my allegations and concluded what
had happened ticked every box for financial fraud so I remained really hopeful
there would be a criminal investigation.

What
happened next is almost beyond belief. I recently asked her what was the state
of her complaint and she sent me the following email.

“...Without them even looking at the evidence I was told by
Devon and Cornwall Police that this kind of fraud it is likely to be too
complicated for a court to understand and therefore too difficult for them,
with their limited resources, to secure a prosecution. They advised me to seek
legal advice before supplying them with any more evidence because they will
most likely view my husband and I as prime suspects in the fraud as, in their
opinion, we had the most to gain from the falsified application. They also said
that even if I can successfully prove I have been a victim of broker fraud, it
is primarily a civil matter and not usually a matter the police would deal
with. They agreed to reopen the case if I can get a statement from the
Bank of Scotland saying they were a victim of this broker fraud too. Needless
to say I have been unsuccessful in this regard...”

Subsequently upon querying
this attitude, she states;

“...However,
after three separate telephone conversations with two different Devon and
Cornwall officers it became evident that their mission was not to collect
evidence to support my allegations of broker fraud to support an investigation
but instead they were very persuasive in their discouragement of my taking
things any further. I remember saying, "Surely it isn't acceptable for a
mortgage broker to put false information on a mortgage application so he
can receive £4,500 in fees," but was told it was going to be just too
difficult prove. I even mentioned DS ***** and his ongoing broker fraud case in
Bristol but this was only met with further disinterest...”

.

I am still in a state of
shock that this should have been the advice from a major police force in this
country, and one from whom I once sought help and assistance in investigating a
major complicated fraud, help which was immediately and unstintingly
forthcoming from a very overworked team of detectives, who nevertheless went
out of their way to help a brother detective officer.

This confirms what I have always feared which is that the police in this
country have just walked away from their primary responsibilities towards the
populace.

First of all, the question of whether this is a case which a jury would
understand is none of their concern. It is a matter, if at all, for the Crown
Prosecution Service to make that call, not Devon and Cornwall Police.

Secondly, the suggestion that you and your husband were primary beneficiaries
is completely false. You can demonstrate that you did not know what information
had been supplied and you did not sign the forms so how do they make this
assumption.

Thrdly, it is not primarily a civil matter, it is an allegation of
fraud, false accounting and one or two other offences.

They know full well that BoS are not going to give that statement, but
in any event, it should be their responsibility to ascertain the BoS attitude.

This is a most awful example of police laziness. They just don't want to
spend the money from their limited budgets to follow up these kind of crimes.
They should still be utterly ashamed of themselves, I have never heard such
utter craven excuses...”

This kind of result following an allegation of fraud is unconscionable.
Before D&C could even consider the case, it had to go through review at
Action Fraud, who clearly thought it was suitable for investigation, otherwise
they would not have referred it to them.

I am wholly staggered that this kind of insouciance should have been
demonstrated towards this woman. She has minutely documented her ordeal,
complete with full exhibits and records, yet the police were not willing to
even begin to make some basic enquiries.

What has happened to the state of affairs in this country that anyone in
the financial services industry can seemingly commit alleged crimes with
impunity and the police will not even bother to make the simplest
investigation?

I have known for years that it was useless to ask for help from the FCA,
or the Financial Ombudsman’s Service, who are both too busy protecting the
interests of their constituents, but I would have hoped that at least the cops
would have seen the injustice of this case and would have made an effort to get
involved.

This case and the attitude of the Devon and Cornwall cops has deeply
saddened me. There was a time when Devon and Cornwall was a force which stood
out in its willingness to think out of the box and adopt new and sometimes
untried tactics. It seems those days are long gone.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!